Tough China trade decision for Obama

A U.S. trade body ruled Thursday that imports of Chinese tires are hurting U.S. manufacturers, teeing up a difficult decision for President Obama.

The U.S. International Trade Commission voted Thursday in favor of a petition brought by United Steelworkers, which said a huge increase in Chinese tire imports had forced plant shutdowns and the loss of jobs in six states over the past five years.

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The Steelworkers group wants a quota to be imposed on Chinese tires to limit imports, and the ITC will meet later this month to recommend a remedy, which could be a quota, tariff on imports or some combination.

A final decision by September on whether to impose any curbs on Chinese tires will be left to Obama, who may also decide it is not in the best national interests of the country to limit Chinese tires.

If Obama does not provide relief, he’ll disappoint unions and leading Democrats such as Senate Majority Whip Dick Durbin (Ill.).

“We're hopeful the Obama administration will enforce the ITC's wise ruling,” said Scott Paul, executive director of the Alliance for American Manufacturing, which includes steelworkers. He said China’s tire industry benefits from government subsidies, labor exploitation and currency manipulation, all of which make it impossible for U.S. producers to compete.

If Obama imposes a quota or tariffs on Chinese tires, he’ll alienate China, which the administration is asking to help with the global recovery. China also owns about $763 billion in U.S. bonds, leading U.S. officials to offer Beijing assurances they will adopt policies to ensure the viability of the U.S. dollar.

It could also lead China to impose restrictions on U.S. exports at a time when world trade is already being crushed by the global recession.

Obama has called on foreign leaders to join him in curbing protectionist policies that could slow the economic recovery. But he and the U.S. have been criticized for “Buy American” language in the $787 billion stimulus bill that, while watered-down by Obama, still offers favor to American firms.

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China’s economic planning agency earlier this month ordered local governments to buy Chinese goods when building roads and other projects funded by that country’s stimulus package.

Siding with the Steelworkers would also lead other groups to file petitions for relief, which would draw opposition from U.S. business groups that import products from China.

Vic DeIorio, executive vice president of GITI Tire, said imposing quotas or tariffs would not lead U.S. manufacturers to increase production in the U.S. of low-cost tires. “Instead, if there is a barrier placed on tires produced in China, we believe that U.S. manufacturers will simply increase importation of tires from other countries such as Poland or Venezuela.”

He also said it would increase prices for U.S. consumers.

Steelworkers filed the petition under the Section 421 trade law, which applies only to Chinese exports to the United States. Many lawmakers voted in favor of China’s joining the World Trade Organization in 2000 only after China agreed to the 421 law.

President Bush rejected every petition for relief under the law that reached his desk. No petition for relief has ever been granted.